university of missouri system board of curators january 31, 2013 finance committee
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University of Missouri System Board of Curators January 31, 2013 FINANCE COMMITTEE. Strategic Financial Planning Assumptions and Three-year Budget Projections UM. FY2014 – 2016 Strategic Financial Planning Assumptions – Three Questions. What are the strategic financial planning assumptions? - PowerPoint PPT PresentationTRANSCRIPT
OPEN – FIN – INFO 1-1
January 31 – February 1, 2013
OPEN – FIN – INFO 1-1
January 31 – February 1, 2013
Strategic Financial Planning Assumptions and Three-year Budget Projections
UMOPEN – GB – INFO 2
University of Missouri SystemBoard of CuratorsJanuary 31, 2013
FINANCE COMMITTEE
OPEN – FIN – INFO 1-2
January 31 – February 1, 2013
FY2014 – 2016 Strategic Financial Planning Assumptions – Three Questions
What are the strategic financial planning assumptions?
Why does the University prepare the assumptions?
What are they used for?
OPEN – FIN – INFO 1-3
January 31 – February 1, 2013
Revenue Drivers that Impact Strategic Financial Planning
Revenue Drivers State Appropriations for
Operations Tuition and Fee Rates Enrollment Other Miscellaneous
Revenue
OPEN – GB – INFO 2
OPEN – FIN – INFO 1-4
January 31 – February 1, 2013
Expense Drivers that Impact Strategic Financial Planning
Expenditure Drivers Salary and Wage Changes Cost of Employee Benefits Maintenance and Repair Other Costs of Doing
Business
OPEN – GB – INFO 2
Salary & Wage 61%
Benefits 17%
FY13 Budget
Other Expenditures
22%
OPEN – FIN – INFO 1-5
January 31 – February 1, 2013
Financial Objectives
Strategic Reallocation – 1%-2% per year growing to 3%-4%
Operating Results – Range 4.5%-5.9%Net Assets – 8.0%-12.1%Expenditure Reductions to Achieve Budget
EquilibriumRevenue Generation to Achieve Budget
Equilibrium
OPEN – FIN – INFO 1-6
January 31 – February 1, 2013
Drivers & Results : Base Case
OPEN – FIN – INFO 2
FY14 FY15 FY16Revenue Assumptions:State Appropriations 0.0% 2.0% 3.0%Missouri UG Rate Increase 1.7% 2.0% 2.0%Other Fee Rate Increase 3.3% 2.0% 2.0%Enrollment & Student Mix Incr. FTE 1.8% 1.3% 1.0%Enrollment & Student Mix Incr. $ $4.9 $4.2 $3.8Other Revenue 2.0% 2.0% 2.0%
Expenditure Assumptions:Salary & Wages 3.0% 3.0% 3.0%Benefit Change % of S&W 1.5% 1.5% 1.5%Benefit Rate 35.37% 36.87% 38.37%Other Expense 3.0% 2.0% 2.0%M&R at Inflation $1.4 M $1.5 M $1.6 M
Other Planning FactorsStrategic Reallocation 1-2% 2-3% 3-4%MO UG Resident Net Tuition @ 1% $2.2Other Tuition Rate Increase @ 1% $2.6
OPEN – FIN – INFO 1-7
January 31 – February 1, 2013
Results : Base CaseBase Year
No ChangeMarginal Change
Marginal Change
Marginal Change
FY13 FY14 FY15 FY16Revenues
State Approp $384.0 $0.0 $7.7 $11.8Net Tuition 552.9
UG Tuition Rate Increase 3.7 4.4 4.4Other Tuition Rate Increase 8.6 7.5 7.5Enrollment Increase 4.9 4.2 3.8
Other Revenues 168.4 3.9 3.4 3.5Total Revenues $1,105.3 $21.1 $27.3 $30.9
ExpendituresSalary & Wage $673.9 $19.9 $20.8 $21.4Benefits 194.5 15.5 16.6 17.4M&R at inflation 1.4 1.5 1.6Enrollment & Strategic Inv 5.3 3.2 2.8Other Expenditures 236.8 9.1 4.9 5.0
Total Expenditures $1,105.3 $51.2 $47.0 $48.3
Change $0.0 ($30.1) ($19.8) ($17.4)
Strategic Reallocation 1-2% 2-3% 3-5%Dollars in Mill ions
OPEN – FIN – INFO 1-8
January 31 – February 1, 2013
Scenario Summary
Base Year No
ChangeMarginal Change
Marginal Change
Marginal Change
FY13 FY14 FY15 FY16Optimistic Total Revenues $1,105.3 $36.9 $33.8 $33.5Total Expenditures $1,105.3 $53.1 $50.0 $51.2Change $0.0 ($16.2) ($16.2) ($17.7)
Base CaseTotal Revenues $1,105.3 $21.1 $27.3 $30.9Total Expenditures $1,105.3 $51.2 $47.0 $48.3Change $0.0 ($30.1) ($19.8) ($17.4)
PessimisticTotal Revenues $1,105.3 $11.0 $7.3 $7.3Total Expenditures $1,105.3 $38.4 $37.2 $38.2Change $0.0 ($27.4) ($29.9) ($30.9)
OPEN – FIN – INFO 1-9
January 31 – February 1, 2013
Section 3: Preliminary FY2014 Budget
Section 1: Setting the Financial Stage
OPEN – FIN – INFO 1-10
January 31 – February 1, 2013
FY 2014 UM Preliminary Budget Issues
RevenuesFlat state supportConstraints on tuition increases
ExpensesIncrease in salaries and wages: merit & marketIncrease in medical costs and the required contribution to
Retirement FundIncrease in M & R
Control rate of increase in expenses relative to revenues
10
OPEN – FIN – INFO 1-11
January 31 – February 1, 2013
Other Issues on the Horizon
State support based on performance fundingLimited capacity to increase tuition & feesPressure to reduce costs and increase productivityFunding for strategic investmentPressure to increase output
Retention ratesGraduation rates# of Degrees Granted
A new financial model for the future
OPEN – FIN – INFO 1-12
January 31 – February 1, 2013
Projected Marginal Costs for FY2014 Budget - $51.2 million
Dec Jan
1. Salary & Wages Increase $19.2 $19.92. Benefits on Salary & Wages Increase 5.4 6.43. Flat Rate Benefit Increase (1.5% of Salary
& Wages) 7.8 9.1
4. Total Compensation $32.4 $35.45. Increase in M&R (inflation) 1.4 1.46. Other Marginal Cost Increases 7.6 9.17. Costs Due to Enrollment &Priorities 4.9 5.38. Total Marginal Cost Increases $46.3 $51.2
$ in Millions
OPEN – FIN – INFO 1-13
January 31 – February 1, 2013
Projected Marginal Revenues for FY2014 Budget - $21.1 million
Dec Jan1. Increase in Net Tuition from Inflation
(2% Dec; 1.7% Jan)$9.5 $8.1
2. Increase in Net Supplemental from rate changes
2.4 2.3
3. Increase in Net Tuition Above Inflation 1.6 1.94. Increase in Net Tuition & Fees from
Enrollment6.6 4.9
5. State Appropriations 0.0 0.06. Increase in Other Revenues (incl.
dedicated) 1.2 3.9
7. Total Marginal Revenue Increases $21.3 $21.1$ in Millions
OPEN – FIN – INFO 1-14
January 31 – February 1, 2013
Preliminary Funding Gap of $30.1 million
Dec Jan1. Marginal Cost Increases $46.3 $ 51.22. Marginal Revenue Increases $21.3 $21.1
3. Net Funding Gap $25.0 $30.14. Gap as a % of Operating Expenses 2.3% 2.7%5. Impact of 1% inc/dec State Approps (net) $3.8 $3.86. Impact of 1% Rate inc in Net Tuition &
Fees $4.8 $4.8
7. Add’l Cost to reach M&R policy (FCNI of 0.30) $49.3 $49.38. Strategic Reallocation 1-2%
$ in Millions
OPEN – FIN – INFO 1-15
January 31 – February 1, 2013
Questions?